| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of administratively binding advice
Authorisation Number: 1012517925947
Advice
Subject: Non-concessional contributions
Questions
1. Can you make non-concessional contributions in the 2013-14 income year without exceeding your non-concessional contributions cap for that income year?
2. Can you make non-concessional contributions of up to $450,000 between 1 July 2014 and before attaining the age of 65, without exceeding your non-concessional contributions cap for that income year?
Answers
Yes
Yes
This advice applies for the following periods:
Year ended 30 June 2014
Year ended 30 June 2015
The arrangement commences on:
1 July 2013
Relevant facts and circumstances
Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.
You are currently under age 65.
You are a member of a self managed superannuation fund (the Fund).
The corporate trustee of the Fund is a private company.
You are currently receiving an account based pension from the Fund.
During the 2010-11 income year, you made non-concessional contributions to the Fund up to the maximum allowed utilising the bring forward provision.
You did not make any concessional or non-concessional contributions to the Fund in the 2011-12 and 2012-13 income years.
You propose to make personal contributions to the Fund up to the non-concessional contributions cap during the 2013-14 income year.
You will turn 65 years of age early in the 2014-15 income year. You propose to make personal contributions of up to $450,000 to the Fund some time between 1 July 2014 and before you turn age 65.
You are not intending to claim the proposed personal contributions as a deduction in the 2013-14 and 2014-15 income years.
Currently, you are not working and do not have any intention of re-entering the workforce between now and prior to you turning 65 years of age or subsequent thereto.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 292-80.
Income Tax Assessment Act 1997 Section 292-85.
Income Tax Assessment Act 1997 Subsection 292-85(2).
Income Tax Assessment Act 1997 Paragraph 292-85(2)(c).
Income Tax Assessment Act 1997 Subsection 292-85(3).
Income Tax Assessment Act 1997 Section 292-410.
Superannuation (Excess Non-concessional Contributions Tax) Act 2007 Section 4.
Superannuation (Excess Non-concessional Contributions Tax) Act 2007 Section 5.
Superannuation Industry (Supervision) Regulations 1994 Subregulation 1.03(1).
Superannuation Industry (Supervision) Regulations 1994 Subregulation 7.01(3)
Reasons for decision
Summary of decision
You will be able to contribute non-concessional contributions in the 2013-14 income year, without exceeding your non-concessional contributions cap.
You will be able to contribute non-concessional contributions totalling $450,000 in the 2014-15 income year, utilising the bring-forward provision, without exceeding your non-concessional contributions cap. However, as you are not currently gainfully employed, the total amount of the $450,000 non-concessional contributions will need to be made before you turn 65 years of age.
To make further contributions on or after your 65th birthday, where you have not contributed up to the limit, you will need to satisfy the 'work test'.
Detailed reasoning
Non-concessional contributions cap
Non-concessional contributions made to a complying superannuation fund are also subject to an annual cap (subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997)). The non-concessional contributions cap for the 2013-14 income year is $150,000.
Non-concessional contributions include:
Ÿ personal contributions for which an income tax deduction is not claimed;
Ÿ contributions a person's spouse makes to their superannuation fund account; and
Ÿ transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income).
Some contributions are specifically excluded from being non-concessional contributions. These include:
Ÿ a Government co-contribution;
Ÿ a contribution arising from a structured settlement or an order for personal injury;
Ÿ a contribution relating to some capital gains tax (CGT) small business concessions to the extent that it does not exceed the CGT cap amount ($1,000,000 indexed annually) when it is made; and
Ÿ a roll-over superannuation benefit.
A person will have a liability to pay excess non-concessional contributions tax at the rate of 46.5% if they have excess non-concessional contributions for an income year (subsection 292-80 of the ITAA 1997 and sections 4 and 5 of the Superannuation (Excess Non-concessional Contributions Tax) Act 2007). A person will be required to ask their superannuation fund to release an amount that is equal to the tax liability (section 292-410 of the ITAA 1997).
The bring-forward provisions
As a concession, to accommodate larger contributions, persons who are under age 65 at any time during an income year are able to 'bring-forward' future entitlements equal to two years worth of non-concessional contributions. This means a person under age 65 in the 2013-14 income year is able to contribute non-concessional contributions of up to $450,000 over three income years without exceeding their non-concessional contributions cap (subsections 292-85(3) and (4) of the ITAA 1997).
The bring-forward will be triggered automatically when contributions in excess of the annual non-concessional contributions cap (currently $150,000) are made in an income year by a person who is under age 65 at any time in the year. However, this is on the proviso that a bring-forward has not already commenced in the preceding two income years (subsection 292-85(3) of the ITAA 1997).
Once a bring-forward has been triggered, the two future years' entitlements are not indexed.
Non-concessional contributions made in the 2010-11 income year
During the 2010-11 income year, you made non-concessional contributions in excess of the non-concessional contributions cap to the Fund. As your total non-concessional contributions for the 2010-11 income year, exceeded the non-concessional contributions cap for the income year, the bring-forward provision was automatically triggered. This allowed you to make the two future years' worth of non-concessional contributions in the 2010-11 income year. The bring-forward provision therefore applies for the 2010-11, 2011-12 and 2012-13 income years.
Proposed non-concessional contributions to be made in the 2013-14 and 2014-15 income years
You propose to make a personal contribution up to the non-concessional contribution cap to the Fund in the 2013-14 income year. As you are not intending to claim this contribution as a deduction, this contribution is classified as non-concessional contributions.
If this contribution is the only non-concessional contribution you make in the 2013-14 income year, you will not exceed your non-concessional cap and thus trigger the bring forward provision. Further, you will not be subject to excess contributions tax on that contribution.
You also propose to make personal contributions of up to $450,000 (utilising the bring-forward provision) to the Fund some time between 1 July 2014 and before you turn age 65 early in the 2014-15 income year.
Provided you make the contribution before you turn age 65, you can contribute up to $450,000 utilising the bring-forward provision. If you do not make the contributions before you turn age 65 you will need to have been gainfully employed on at least a part-time basis in the income year to make the contributions on or after this date.
Other relevant comments
Gainfully employed on at least a part-time basis - 'Work test'
Under subregulation 7.01(3) of the Superannuation Industry (Supervision) Regulations 1994 (SISR) there are no conditions required to be met in order for a superannuation fund to accept contributions from a member who is under age 65.
However, where the member is between age 65 and age 70, they must be gainfully employed on at least a part-time basis during the income year in order for a superannuation fund to accept contributions from that member. To meet this requirement, the member must be gainfully employed for a least 40 hours in a period of not more than 30 consecutive days in that income year. This is generally referred to as the 'work test'.
'Gainfully employed' means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment (subregulation 1.03(1) of the SIS Regulations). The concept of 'gain or reward' envisages receipt of remuneration such as salary or wages, business income, bonuses, commissions, fees or gratuities, in return for personal exertion. It does not encompass a person who is only receiving passive income (e.g. trust distributions, dividends) or a person who does 'volunteer' work.